On October 24, 2005, the Securities and Exchange Commission (SEC)
approved an amendment to the fee schedule for certain statutory
employment discrimination claims.1 Under the new fee schedule,
a current or former associated person who brings a statutory
employment discrimination claim that is subject to a predispute
arbitration agreement will pay no more than a $200 filing fee at
the time that the claim is filed. The member that is a party to such
a statutory employment discrimination arbitration proceeding will
pay the remainder of the filing fee, if any, as well as all forum fees.

The text of the amendment is set forth in Attachment A.

The amendment will become effective on January 17, 2006, and will
apply to all claims filed on or after that date.

Questions/Further Information

Questions regarding this Notice may be directed to John D.
Nachmann, Counsel, NASD Dispute Resolution, at (202) 728-8273 or
john.nachmann@nasd.com.

Background and Discussion

The Rule 10210 Series of the NASD Code of Arbitration Procedure (Code) contains
special procedural rules applicable to the arbitration of employment discrimination
claims. The Rule 10210 Series, however, does not provide a separate fee schedule for
employment discrimination claims. Rather, Rule 10205, which details the schedule of
fees for industry and clearing controversies, provides that an associated person shall pay
the non-refundable filing fee and hearing session deposit in the amount specified for
customer claimants in Rule 10332. Consequently, associated persons who bring statutory
employment discrimination claims pay the schedule of fees set forth in Rule 10332,
which are based on the dollar value of the claim.

Beginning in the 1990s, state and federal courts considered whether employers could
require mandatory arbitration of statutory employment discrimination claims and then
require the employee to pay all or part of the arbitrators' fees. Specifically, the courts
disagreed as to whether requiring claimants with federal statutory claims to pay
arbitral forum fees and expenses would prevent them from effectively vindicating their
claims.

In order to ensure that those associated persons who are required by their employers to
arbitrate statutory employment discrimination claims do not face financial barriers to
effectively vindicating such claims, NASD has revised its arbitration fee schedule.
Specifically, a current or former associated person who brings a statutory employment
discrimination claim that is subject to a predispute arbitration agreement2 will pay no
more than a $200 filing fee (which is non-refundable) at the time that the associated
person files such a claim.3 The member that is a party to a statutory employment
discrimination arbitration proceeding will pay the remainder of the filing fee, if any, as
well as all forum fees. The $200 fee is meant to be comparable to what an employee
would pay to file a similar claim in court.

While the filing and forum fees will not be subject to allocation by the arbitrator(s), the
panel will have the ability, as it does currently under the Code, to allocate among the
parties the various costs associated with arbitration, including costs for the
adjournment of hearings (Rule 10319); the production of documents (Rules 10321 and
10322); the appearance of witnesses (10322); and the recording of proceedings
(Rule 10326). In addition, arbitrators will still have the ability to allocate attorneys' fees,
in accordance with applicable law, as currently provided for in Rule 10215.

2 The new rule applies only to disputes that are
subject to a predispute arbitration agreement.
As provided in Rule 10201(b), a claim alleging
employment discrimination, including a sexual
harassment claim, in violation of a statute is not
required to be arbitrated merely because an
associated person signed the Form U4. Such a
claim may be arbitrated only if the parties have
agreed to arbitrate it, either before or after the
dispute arose. The regular fee schedule set forth
in Rule 10332 continues to apply to claims that
are not subject to a predispute arbitration
agreement. Thus, if a member firm does not
require its employees to arbitrate employment
disputes, but the employee chooses to file a
statutory employment discrimination claim in
arbitration (and the firm agrees to arbitrate),
the employee will be subject to the regular fee
schedule.

3 As previously mentioned, associated persons
who have statutory employment discrimination
claims currently pay the filing fees and hearing
session deposits provided in Rule 10332 at the
time that they file a claim. These charges, which
are based on the amount of the claim, range
from $25 to $600 for filing fees and from $25 to
$1,200 for hearing session deposits. Under the
new fee schedule, the filing fee will continue to
be based on the amount of the claim as set
forth in Rule 10332, but will be capped at $200.
Thus, for example, an associated person who
files a statutory employment discrimination
claim requesting damages of $4,000 will pay a
$50 filing fee, while the filing fee for an
associated person with a $4 million claim will be
$200. Hearing session deposits will no longer be
required under the new fee schedule.

ATTACHMENT A

New text is underlined.

10210. Statutory Employment Discrimination Claims

The Rule 10210 Series shall apply only to disputes that include a claim alleging employment discrimination,
including a sexual harassment claim, in violation of a statute. The Rule 10210 Series shall supersede any inconsistent
Rules contained in this Code.

* * * * *

10217. Fees

(a) For any claim of statutory employment discrimination submitted to arbitration that is subject to a
predispute arbitration agreement, a party who is a current or former associated person shall pay a non-refundable
filing fee according to the schedule of fees set forth in Rule 10332, provided that:

(1) In no event shall such a person pay more than $200 for a filing fee;

(2) A member that is a party to such an arbitration proceeding under this rule shall pay the
remainder of all applicable arbitration fees set forth in Rule 10332; and

(3) No party shall be required to remit a hearing session deposit.

(b) The arbitration fees described in paragraph (a)(2) are not subject to allocation in the award. The panel,
however, may assess to a party who is a current or former associated person those costs incurred under Rules 10319,
10321, 10322, and 10326.